Wednesday, November 25, 2020

Investors urged to diversify to survive volatility next year

Oct 15. 2020
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By The Nation

Trinity Securities is advising investors to allocate 10 to 20 per cent of their portfolios to Thai shares and 10 per cent to shares in China and Vietnam in order to cope with volatility next year.

Trinity Securities’ director Dr Visit Ongpipattanakul said the economy next year will face a double-dip recession if the second Covid-19 outbreak emerges.

He said the International Monetary Fund (IMF) expects economic growth to be below 1 per cent next year down from the previous growth of over 4 per cent due to Covid-19 fallout. IMF expects the economy to only grow by 2 per cent in 2024.

As for the impact on the Thai stock market, Visit said the Stock Exchange of Thailand (SET) will fall in the first quarter of 2021 before recovering in the second quarter, because the country’s gross domestic product (GDP) has contracted in the second quarter of this year.

“Hence, diversifying investment to maintain returns is an important strategy for next year," he said.

“In 2019-2020, assets that generated high returns were the NASDAQ Index, which grew 35 per cent in 2019 and 20 per cent in 2020, Bitcoin 95 per cent in 2019 and 46 per cent in 2020, gold 18 per cent in 2019 and 25 per cent in 2020, and Chinese stocks 22 per cent in 2019 and 7 per cent in 2020," he said, adding that Thai stocks generated returns of 1 per cent in 2019 and -20 per cent in 2020.

He said he expects the asset market to face volatility in the fourth quarter as foreign investors are waiting for the results of the US presidential election. However, he believes, the Thai stock market and emerging markets will benefit from the US policy after election.

As part of the investment strategy for next year, he said, investors should assign 10 to 20 per cent of their portfolio to small- and medium-cap Thai stocks, 10 per cent to Chinese and Vietnamese stocks, 10-20 per cent in developed stock markets, 5-10 per cent in gold, 1-5 per cent in alternative assets, and hold 35 per cent cash to deal with volatility.

He said Vietnamese shares gained thanks to the country’s V-shaped economic recovery in which the country’s GDP is expected to grow by 2.7 to 3 per cent this year and 6 to 8 per cent next year, while the country’s foreign exchange reserve was over US$80 billion.

“Meanwhile, Vietnamese stock market's status in MSCI Frontier Market and its regulations adjustment will draw more investment from foreign investors at the end of this year. The market will also be listed in MSCI Emerging Market in mid-2022," he said

"We advise investors to start investing in Vietnamese shares from October this year, while that they can use dollar-cost averaging [DCA] investment strategy to manage cost."

He added that Trinity Securities’ SSI Sustainable Competitive Advantage Fund (SSI-SCA) is investing in Vietnamese stocks in Ho Chi Minh Stock Exchange and Hanoi Stock Exchange.

“This fund is managed by a Vietnamese fund manager, so there is no limit on foreign investors’ shareholding," he added.

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